The results season from reinsurers saw “robust” performances, according to UBS, with earnings beating estimates by 47% on average.
July was a disconcerting month, however, with more natural disasters than normal while the increase in COVID-related deaths resulted in earnings downgrades.
“Given hurricane season timing, and with budgets already expected to be fully consumed by YE, timing is not right to be bullish the sub-sector,” UBS said.
Its top picks in the sub-sector are Munich Re and Hannover Re “given solvency and capital flexibility coupled with growth”, while Hiscox Ltd (LSE:HSX) (LSE:HSX) and Lancashire Holdings Ltd (AIM:LRE, OTC:LCSHF) (AIM:LRE) get the nod as the best of the London-listed operators. Hiscox (target price 1,150p) is chosen because of “retail recovery and more robust capital level” and Lancashire (target price 872p) because of a “hardening market theme”.
Beazley Group (LSE:BEZ) PLC (LSE:BEZ) is downgraded to ‘sell’ although the target price remains at 382p; the change reflects the 15% or so surge in the share price since its results.
“Exposure to at-risk lines and low capital flexibility concerns remain,” UBS said.